Foratom says reforms to Europe's ETS insufficient

21 February 2017

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Foratom has welcomed the European Parliament's approval of European Commission proposals to reform the bloc's Emissions Trading System (ETS). The European nuclear trade body added, however, the carbon price needs to increase significantly in order to boost investment in low-carbon energy sources.

The EU ETS was launched in 2005 and operates in 31 countries - all 28 EU countries, plus Iceland, Liechtenstein and Norway. It is designed to limit greenhouse gas emissions from more than 11,000 heavy energy-using industries (power plants and manufacturing facilities) and airlines operating between these countries. It covers about 45% of the bloc's GHG emissions.

A centrepiece of the EU's 2030 energy and climate policy framework is the binding target to reduce overall GHG emissions by at least 40% below 1990 levels by 2030. To achieve this cost-effectively, the sectors covered by the EU ETS will have to reduce their emissions by 43% compared with 2005, while non-ETS sectors will have to reduce theirs by 30%.

The European Commission published its proposal in July 2015 to revise the directive on the EU ETS for the 2021-2030 period. Its proposal for a market stability reserve (MSR), adopted in October that year, takes 12% of the surplus allowances out of the market from the beginning of 2019.

In December last year, Foratom issued a position paper on the proposal and the ongoing debate in the European Parliament concerning the steps needed to reach Europe's decarbonisation goals. At that time Foratom said the Commission's proposals and other measures introduced by the EU - including backloading and the MSR - are headed in the right direction but more must be done to restore confidence in the ETS, so that it can help decarbonise the European economy in an affordable way.

Foratom had called for a significant reduction in the oversupply of allowances in the ETS by increasing the speed at which allowances are moved to the MSR. It also wanted an improvement in regulation of the volume of allowances.

On 15 February, the European Parliament voted in favour of the Commission's proposed revisions to the ETS directive.

Miguel Arias Cañete, European commissioner for climate action and energy, said: "The landmark vote provides a clear outcome after more than a year of discussions in parliament, and it demonstrates the European Union's commitment to turning the Paris Agreement into reality through concrete action on the ground. Now the EU ETS revision is on the Council's table and we hope they can swiftly reach an agreement to kick-start negotiations."

Foratom said yesterday: "If the ETS reform prevails with the Council, the European Parliament's position should help to boost carbon prices but [it] falls short of fully aligning the ETS with the Paris Agreement. The ETS should be spearheading the switch from fossil fuels to low-carbon sources of electricity (renewables and nuclear). If investments in low-carbon electricity production are to be incentivised, the price of carbon needs to be significantly higher than it is currently."

Foratom said it supported the report from the European Parliament's Committee on Environment, Public Health and Food Safety, which the parliament voted on last week. That report had proposed an annual reduction in the cap on emissions of 2.4%. Foratom said it was "disappointed" this was "watered down" to 2.2% in the plenary vote - in line with the European Commission's proposal - but it welcomed the improvement compared with the current rate of 1.74%.

"It will now be crucial for the Council to agree on an ambitious position that supports the measures adopted by the European Parliament," Foratom said.